Dr. WesterholdName:______

Econ 232

HW #6 and #7: Short Run Production and Costs due Wednesday, November 10th (will count as two assignments). Remember, assignments not stapled receive a 15% penalty and assignments turned in late receive a 15% penalty per week day.

1A. Fill in the following table:

Quantity of LABOR (L) / Total
Product
(TP or Q) / Marginal Product
(MP) / Average
Product
(AP)
0 / 0 / ------/ -----
1 / 25
2 / 60
3 / 100
4 / 125
5 / 135
6 / 135
7 / 120

1B. Between what labor units is the firm experiencing “increasing marginal returns to labor”. Briefly explain what this means in words.

1C.Between what labor units is the firm experiencing “diminishing marginal returns to labor”. Briefly explain what this means in words.

1D. Between what labor units is the firm experiencing “negative marginal returns to labor”. Briefly explain what this means in words.

1E. What is the maximum number of workers this firm should consider hiring? Why?

2A. Fill in the gaps in the Table below.

Quantity of Labor (L) / Total Product
(TP or Q) / Marginal Product (MP) / Average Product
(AP)
0 / ----- / ------
1 / 100
2 / 110
3 / 300
4 / 85
5 / 340
6 / -20

2B. Between what labor units is the firm operating in Stage I of production?

2C. Between what labor units is the firm operating in Stage II of production?

2D. Between what labor units is the firm operating in Stage III of production?

3. Fill in the following table (please note that Labor is not defined in increments of one unit)

Quantity of Labor (L) / TP (Q) / MP / AP
0 / 0 / ------/ ------
10 / 100
20 / 250
30 / 350
40 / 400
50 / 425

4. Calculate the following short run cost measures in the table below:

QUANTITY / TFC / TVC / TC / MC / AFC / AVC / ATC
0 / 100 / 0 / ------/ ------/ ------/ -----
1 / 50
2 / 80
3 / 130

5. Calculate the following short run cost measures in the table below (You may have to round to two decimal places for some of these answers. If you get something like 299.99 go ahead and round to 300).

QUANTITY / TFC / TVC / TC / MC / AFC / AVC / ATC
0 / 0 / 300 / ----- / ---- / ---- / ----
1 / 400
2 / 62.5
3 / 35
4 / 125
5 / 250
6 / 100
7 / 150
8 / 100

6. Fill in the following table of short run costs. Note that the Quantity of output is not expressed in increments of one unit.

QUANTITY / TFC / TVC / TC / MC / AFC / AVC / ATC
0 / 300 / 0 / ------/ ------/ ------/ ------
10 / 500
20 / 1800
30 / 3500

7. Using the following table to answer parts A-F. Hint: remember that TVC=0 at Q=0.

QUANTITY / TC
0 / 150
1 / 200
2 / 240
3 / 300
4 / 400
5 / 550
6 / 800

You should be able to answer these questions without having to create a big table showing all of the values. Work on trying to get these relationships from what is given because you will have to do something similar on your exam and you may not have time to write in all the unnecessary values just to find the two or three values asked.

A. What is the TFC at Q=4?______

B. What is the TVC at Q=5? ______

C. What is the AFC at Q=2? ______

D. What is the AVC at Q=6? ______

E. What is the MC at Q=3? ______

F. What is the ATC at Q=4? ______

End of Assignment.